Building a custom home from foundation to finish can be a daunting task. It requires a much greater investment of your time and energy than buying an existing home that is move-in ready. There are also some common pitfalls to building that could cost you a lot of money or leave you wishing you had made different choices.
However, most issues can be easily avoided if you take the right proactive steps in advance, and your upfront effort will be far outweighed by the reward of living in a dream home built exactly to your own needs and wishes!
Below are my 7 tips for building a successful custom home.
1. Hire Local
A well-established local builder will have plenty of nearby subcontractors and suppliers to rely on. This reduces time and costs, as you will avoid waiting for out-of-town crews and deliveries to arrive, and local builders can often obtain preferential pricing on subcontractor bids and material purchase orders.
The same goes for your architect and banker, if you are using one, as they will both need to work closely with your builder. The architect will want to visit the site to make sure their design is being properly executed, and the banker will need to quickly approve the builder’s draws against your construction loan.
2. Investigate the Area
Before purchasing a piece of land, drive around the area to get a feel for the surrounding environment. Check for convenience to interstates, schools, stores, and restaurants. See what nearby homes and neighborhoods look like, and make sure that what you’re planning to build is going to fit in with those around it. (You never want to be the biggest or most expensive house on the block, because you’re less likely to get your money back if you sell.) If you’re building in an existing neighborhood, find out whether there is a homeowner’s association that imposes any restrictions. You’ll also want to check with the city and/or county for any zoning ordinances that might impact your plans.
Contact an experienced local Realtor, and he or she will take care of this research at no cost to you. Your agent will also help you negotiate the purchase price on your land, possibly saving you a lot of money in the process.
3. Plan for Your Future
Your new home should be functional, comfortable, and convenient for many years to come. When planning your home’s layout, think not only about your current lifestyle but also what you might want years down the road. Younger adults unsure of future family size may want to plan in such a way that future expansions are both possible and cost-effective. Older adults may want to consider unforeseen medical events, so having a master bedroom on the ground floor is a smart bet, as well as wider hallways and doors that can accommodate mobility equipment.
The builder you hire may have an existing home plan they can customize to fit your needs, but for something truly original, you might want to hire an architect instead. Architects understand every aspect of what gives a space form, function, and visual aesthetic – including mathematical ratios, materials, textures, colors, fixtures, and more. A great architect will take into account your needs, tastes, and preferences to create a home that far exceeds anything you could have imagined.
4. Carefully Select Your Builder
It should go without saying that finding a builder you can trust is THE most important part of building your custom home. Before hiring any builder, ask for and verify the following:
- Licensing. Any reputable, active builder will be licensed with your state contractor’s board. In Arkansas you can go to http://aclb2.arkansas.gov/clbsearch.php and search for you builder. Make sure their license is active and approved for residential work. If it’s not displayed as active, call the board to verify status, as renewals can take 2-6 weeks to go through.
- Insurance and Surety Bond. In addition to an active license, your builder should carry general liability insurance to cover any catastrophic incidents that may occur during construction, as well as a surety bond or equivalent umbrella policy to cover possible lawsuits. Ask to see the declarations page and coverage limits.
- Sample selection of previous projects and references. Drive past those houses and speak to the homeowners if possible. Ask about follow-through, whether the job was completed on schedule and on budget, and if they were pleased with the quality of work.
- List of subcontractors and suppliers. Check the builder’s relationships with their subs and supply houses. Basically, find out if they pay their bills. A builder who is behind in payments will most likely result in delays on material deliveries, and he may have a hard time keeping a quality crew of workers.
5. Don’t Choose Your Builder Solely on Bid Price
If you’ve spoken with multiple builders, be wary of choosing the highest or lowest bidder simply based on price. The highest bid doesn’t necessarily mean you get a superior product, and the lowest bid might mean that you’ll be surprised with extra costs as construction progresses.
If a builder provides a suspiciously low bid, they either lack the experience to price the project accurately, or they intend to deceive you with low numbers on the front end and add more later. Neither of those you want to deal with.
6. Hire a Reputable Attorney
Once you’ve chosen your builder, hire a lawyer familiar with real estate law to review the proposed contract. Building a home is a major investment, and it’s important to make sure all expectations and responsibilities are spelled out very clearly. A small up-front fee to an attorney could save you thousands of dollars if something happens to go wrong during construction.
7. Choose the Right Banker
Some people might pay cash for their custom home, but most others will require some form of financing. There are many ways to structure your loan, but some methods will save you considerable time and money.
For instance the traditional method of arranging two separate loans (one for the construction phase and one for permanent mortgage financing) may be easier for your banker to set up but end up costing you more in closing fees. Newer loan programs are available that combine the two phases into one closing, saving you time and money. Also, some banks will treat your land differently. Find one that will count your land purchase toward your equity position, reducing your required down payment and possibly getting better rates and terms on account of a lower loan-to-value ratio.
Our suggestion is that you ask your builder and a Realtor experienced in residential construction to find out which bankers best understand the process and are easiest to work with.